The concept of a straw man is easiest understood by looking at the use of the literal straw men, which is to serve as a dummy for a specific purpose. The most common use of straw men is as a scarecrow to help farmers guard their fields. Aside from that straw men are also used as dummies for everything from combat training targets to effigies during protests.

In business and finance terms, a straw man also serves as a dummy but this time with the specific purpose of hiding the identity of the person or firm behind the business or financial transaction.

In most cases, transactions involving a straw man are of an illegal or questionable nature, hence the need for primary movers to remain unknown. However, straw men can also be used for legal transactions that simply require discretion.

Just like dummies used for combat trainings, straw men, also sometimes called front men, in business get the full brunt of the law when the illicit transaction is found out. The real entities behind the transactions stay shielded and safe, unless the straw man decides to tell on them.

However, in some cases the straw man may not even be allowed to find out who he is really representing and could only communicate with them through a middle man. Straw men may or may not be aware of the illegal transaction of the business and usually accept the position due to the relatively huge financial reward that goes with the work.